As summer begins, trouble in the US airways

NEW YORK
— Buckle those seat belts. The nation's airways are in position to create some not-so-friendly skies.

With airplanes packed with more passengers than ever before, forecasters predicting severe hurricane and thunderstorm seasons, and airline employee morale at what experts say is a record low, this summer could become one of the most chaotic. Some analysts are predicting it could even rival the summer of 2000, which was laden with work slowdowns, record flight delays, and passenger frustration.

"All of the pieces are in place," says Kevin Mitchell, chairman of the Business Travel Coalition in Radnor, Pa. "There's so much dissatisfaction, and so many employees are burned out. They're working longer hours for less pay in a system that is jammed to the hilt."

Indeed, labor dissatisfaction could be a key factor in how the summer travel season goes. Pilots, flight attendants, and ground workers are already taking to picket lines – at a Washington rally last Thursday and at recent shareholder meetings. Their mantra: "We're takin' it back!" – referring to their pay and benefits.

They're angry at what they see as management enriching itself at their expense. A case in point: After United Airlines was in bankruptcy for three years, during which workers lost their pensions, took pay cuts as high as 50 to 60 percent, and agreed to work longer hours, CEO Glenn Tilton walked away with a $40 million bonus in 2006.

Since 9/11 and the economic downturn of 2001, almost two dozen airlines have gone into bankruptcy. In almost every case, labor took pay cuts and agreed to work longer hours to help the nation's large traditional airlines bring their costs down. At American Airlines, which avoided bankruptcy, workers also took pay cuts that they saw as a collaborative effort with management to save the airline.

"They made those sacrifices for the life of the company and with the understanding that when the company was back on the road to profitability, those sacrifices would be rewarded," says Capt. Paul Rice, first vice president of Air Line Pilots Association. "But as profits have finally come in, almost the first action of senior management in most companies has been to reward themselves – not to reinvest in the company, not to thank shareholders or their workers."

The Air Transport Association (ATA), which represents the largest airline companies, declined to comment on labor's concerns or executive compensation. United Airlines declined to comment in an interview and did not respond to a list of e-mailed questions. But some analysts note that large bonuses are necessary to retain top-level corporate leadership.

During a conference call about first-quarter earnings with reporters in April, Mr. Tilton said that under his leadership, the company was in a "significantly improved financial condition," generating increased cash flows that they've been using to "improve our balance sheet and preserve our strategic options." But he declined to address labor's concerns about executive compensation, instead noting that the current labor contracts, which were negotiated during bankruptcy, will remain in place until they expire.

"[The contracts are] a value to the company," he said. "We're looking forward to continuing dialogue individually with all of our unions on a regular basis to address issues that we can address."

The response infuriated many employees who had consciously decided to make sacrifices and sign a six-year contract to assure the banks that United would be stable in its effort to emerge from bankruptcy. "There was shared sacrifice, and we were hoping for shared reward," says one pilot, who asked not to be named. "It's just not fair. It offends basic human sensibilities." This employee, like others, also contends that United continues to be poorly managed. In the pursuit of cost cutting, Tilton's team has stripped the carrier to the bone, they say, leaving no flexibility or surge capacity to deal with potential problems.

"Regardless of whether there was labor unrest or not, if they start having thunderstorm problems this summer, they don't have enough people to staff this or most other airlines," says the employee. "And because of the labor unrest, people may be less willing to twist themselves into a pretzel and forgo a family event to help the airline cover a trip."

Many aviation analysts agree with that assessment. They say that while there will probably not be the work-to-rule slowdowns by unions that marked the summer of 2000 during contract negotiations, there could still be significant problems. The combination of management's large bonuses, staff burnout, and labor shortages could create a similar scenario – delays, delays, and more delays.

"You've got people who've worked hard, given up their pensions, given up their pay, and in some cases given up their future, and you have these executives feasting on the companies. Would you go the extra mile?" says Michael Boyd, president of the Boyd Group, aviation consultants in Evergreen, Colo. "We have a situation where everything is full, so if a flight cancels for whatever reason, there are [no extra planes] to put those passengers on because there's no slack."

Analysts like Mr. Mitchell of the Business Travel Coalition say that management should have been more sensitive to employee morale as they passed out bonuses this year. At the same time, he warns that if employees express their dissatisfaction by not going the so-called "extra mile," they do so at their own peril.

"You push the envelope this time around, and when we go into the next downturn, it could be lights out, game over for some of these carriers," says Mitchell.

Labor troubles aside, even the big airlines' lobbyist, the ATA, suggests that passengers be prepared for potential complications this summer.

"Absolute patience and flexibility where possible," says David Castelveter of the ATA. "There are full airplanes, which means when there is disruption, the carriers don't have the luxury of having a $30 million or $40 million aircraft waiting around [to take up the slack]. The carriers just don't have the space to get passengers quickly to their destination."